Insurance Binders: What You Need to Know

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Insurance Binders: What You Need to Know

Many have heard of them—but what exactly are they?

Let’s face it, insurance can be confusing. Most folks depend on their agent to fill them in on the details that are necessary and choose not to worry about the ones that should be left to the experts. But understanding many of the industry terms and how they apply to you and your insurance policies is always a good idea. “Insurance binder” is one term that many people aren’t clear on, including what it means and when you would need one. So here’s a quick overview of what you need to know:

What is an insurance binder?

An insurance binder is a temporary contract that states that a certain insurance policy has taken effect. So essentially, if you were buying a new car and wanted to make sure it was covered even before you drove it home, you could call your insurance company and ask them to issue a binder.

Binders are a short-term agreement that your insurance company issues based on your arrangement with them. And they do not necessarily guarantee long-term coverage.

When do I need one?

There are several scenarios where an insurance binder may be necessary and if you’re not sure if you need one, the advisable thing to do is to call your provider. Some examples of when you would require a binder include:


Purchasing a home: Your title company may require you to get a homeowner’s binder before they are willing to handle your closing

Buying a new car: If you’re purchasing at a dealership, it’s not uncommon for the dealer to require you to have an insurance binder before you can take it home

Renting a home: Some landlords require that their tenants get a renter’s insurance policy binder to ensure they are not liable for loss or damages to personal property

How long is the term?

Insurance binders are meant to be interim policies that are only in effect until the long-term policy has been written. They can vary in length from 30 to 60 days and can usually be cancelled anytime within that period—although some carriers will specify a date that a cancellation has to occur by.

What happens after a binder is issued?

In most cases, after you’ve been issued a binder, your insurance provider will assess the risk of taking on this policy, check out all of the information you’ve provided to them (if you don’t already have policies with them), and review your records and claims history. Once they determine the level of risk, they’ll set a premium amount and advise you of how much you need to pay upfront to put the long-term policy into effect. The process, although it may seem long, usually doesn’t take too much time. Once your policy is approved, you will receive the documentation from your insurance provider.

With any assets, including your home, car, boat, or even your life, you want to be sure you’re protected as quickly as possible. So when you’re in need of insurance, a binder can provide peace of mind that you’re covered until your official policy is in place.

If you have any questions about insurance binders or want to get a quote on an insurance product, give us a call at 305-648-7070 or fill out our online quote request form.